District Court Dismisses Class Action In Favor Of Bilateral Arbitration In Favorable Ruling For Employers
On April 18, 2012, U.S. District Judge F. Dennis Saylor IV issued a decision in Karp v. Cigna Healthcare Inc., No. 11-CV-10361 (D. Mass. Apr. 18, 2012), granting a defense motion to compel bilateral arbitration of the Plaintiff’s claims in a proposed $100 million gender discrimination class action against Cigna. The ruling applies the two recent Supreme Court arbitration opinions - AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), and Stolt-Nielsen v. Animalfeeds International Corp., 130 S.Ct. 1758 (2010) - to eviscerate plaintiffs' class action.
In Karp, Plaintiff brought suit on behalf of herself and other similarly situated employees contending that her employer, CIGNA Healthcare, Inc. (“Cigna”) engaged in systematic gender discrimination in violation of Title VII and Massachusetts General Laws. Finding no evidence of an agreement to arbitrate on a class basis, Judge Saylor enforced the parties’ arbitration agreement and compelled bilateral arbitration. In a significant win for employers, Judge Saylor refused to defer the decision about whether the arbitration agreement allowed class claims to the arbitrator and rejected Plaintiff’s attempts to block enforcement of the arbitration agreement by asserting a patternor practice workplace bias claim.
Plaintiff, a provider contract manager, joined Cigna in 1997. In November 2005, Cigna updated its Employee Handbook. Plaintiff checked “yes” on an electronic receipt for the Handbook, which provided that Plaintiff “agreed” to resolve any dispute with Cigna under Cigna’s Employment Dispute Arbitration Program. Id. at 3. The receipt also stated that “I understand that any such Arbitration will be conducted pursuant to the CIGNA Employee Dispute Arbitration Rules and Procedures in effect at the time such arbitration is commenced.”Id. Neither the Handbook nor the receipt mentioned class claims.
Cigna set forth additional detail as to the scope of arbitration – that it did not include in the Handbook – in its Arbitration Policy and Arbitration Rules and Procedures. In the Arbitration Policy, Cigna provided that no class-wide arbitrations were allowed, and in the Arbitration Rules and Procedures, Cigna provided that each party seeking resolution of its claims “must proceed individually” and “[t]here shall be no class or representative actions permitted.” Id. at 4-5.
On March 3, 2011, Plaintiff brought an action on behalf of herself and other similarly situated individuals alleging that Cigna engaged in systematic gender discrimination by paying women less, denying promotions, giving women less preferable work assignments, and subjecting women to gender-based hostility. Defendant moved to compel arbitration and dismiss or, in the alternative, stay the litigation.
The Court’s Opinion
Plaintiff did not dispute that she knowingly agreed to arbitrate her claims. Plaintiff, however, contended that she was entitled to assert a class-based pattern-or-practice claim, either through class arbitration or litigation, because she did not agree to waive class claims and because bilateral arbitration would not adequately vindicate her statutory rights under Title VII.
At the outset, Judge Saylor noted that, because the arbitration agreement was not ambiguous, the determination of whether it barred or allowed class arbitration was a question for the Court to decide. Id. at 7 n.6. Relying on Supreme Court precedent, Judge Saylor found that, because “the ‘changes brought about by the shift from bilateral arbitration to class-action arbitration’ are ‘fundamental,’” a party cannot be compelled to arbitrate class claims unless something in the contract indicates, at least implicitly, that it agreed to permit class arbitration. Id. at 7-8 (quoting AT&T Mobility LLC v. Concepcion, 131 S. Ct. at 1750).
The Court reasoned that although there was “certainly some question” about whether Cigna’s policies and procedures could be enforced against plaintiff, “there is no doubt that defendant did not agree to permit class arbitration.” Id. at 9. Accordingly, Judge Saylor concluded that he could not compel Cigna to submit to class arbitration.
The Court next considered whether Plaintiff should be entitled to litigate her claims on a class basis in a judicial forum. Judge Saylor found that, in order to maintain a class action, a plaintiff must have an individual claim, and by agreeing to arbitrate her individual claim, Plaintiff waived her ability to serve as a class representative in a litigated action. Id. at 9-10.
The Court rejected Plaintiff’s argument that arbitration would preclude her from vindicating her statutory rights under Title VII. Plaintiff contended that she would not be able to assert her pattern or practice discrimination claim in a bilateral proceeding because it is unavailable outside of the class action context. Id. at 11. The Court disagreed. Judge Saylor ruled that “a pattern or practice claim is clearly not a separate cause of action." Id. at 16. Rather, a pattern or practice claim is “merely a method of proof – that is, a method of proving a Title VII claim.” Id. at 17. If a plaintiff can prove that she was the victim of an isolated incident of discrimination, “surely she should be allowed to prove that she was the victim of a more egregious form of discrimination.” Id. at 18. The “minor procedural difference” in burden-shifting that would accompany a bilateral assertion of a pattern or practice “is not sufficient to render the arbitration agreement unenforceable.” Id. at 19.
For these reasons, the Court enforced the arbitration clause and compelled bilateral arbitration of Plaintiff’s discrimination claims. In so doing, Judge Saylor rejected the reasoning of Chen-Oster v. Goldman, Sachs & Co., 785 F. Supp. 2d 394, 409-10 (S.D.N.Y. 2011), where a magistrate judge reached the opposite result in a similar pattern-or-practice case. Id. at 20 n.19.
The "Vindication Of Statutory Rights" Gambit
While the result in Karp is a home run for the employer, defendants should be mindful that the plaintiffs' class action bar is litigating a myriad of theories to "work-around" AT&T Mobility LLC v. Concepcion and Stolt-Nielsen v. Animalfeeds International Corp. This new phenomenon is the subject of recent media attention of several of our previous blog postings, such as the Advisen Front Page News article by Susanne Sclafane.
In this context, plaintiffs' counsel have advanced the notion that a workplace arbitration agreement precluding a class action is void on account of its frustration of a worker's ability to vindicate their statutory rights. Thus far, that argument has gained traction in the U.S. District Court for the Southern District of New York in Chen-Oster, which is the subject of an appeal to the Second Circuit. Signaling the importance of this issue, the U.S. Chamber of Commerce submitted an amicus brief for the defense on April 3, arguing that the vindication of statutory rights argument is incorrect, and that assertion of class claims or a pattern or practice theory does not gut an otherwise enforceable workplace arbitration agreement.
Implications For Employers
The result in Karp is the polar opposite to Chen-Oster where the "effectuation of public policy" argument defeated the employer's efforts to force a workplace class action into a single plaintiff bilateral arbitration. The Court’s opinion in Karp is a useful precedent for employers seeking to assert an arbitration defense under the Federal Arbitration Act in an employment discrimination class action. The Court rejected Plaintiff’s attempt to end-run an arbitration agreement by asserting a claim that, according to Plaintiff, could be litigated only on a class-wide basis. In so doing, the Court confirmed that a class action or pattern or practice claim are procedural devices – or “method of proof” – that do not allow plaintiffs to avoid bilateral arbitration.